U.S. and European shares kicked off the new quarter with gains on Monday as talk of interest rate increases boosted bank stocks, while the dollar edged up from nine-month lows as U.S. Treasury yields hit their highest since mid-May.
Oil prices resumed their longest stretch of daily gains in more than five years after data pointed to moderating U.S. crude output, though analysts said news of rising OPEC production could cap the rally.
The S&P 500 index rose after notching its strongest first half-year performance since 2013, with the energy sector leading the pack in percentage gains.
U.S. stock trading volume was expected to be light, with an early close at 1 p.m. ET (1700 GMT) ahead of Tuesday's Independence Day holiday when the market will be shut.
Investors were getting used to the idea that central banks including the European Central Bank could move away from stimulus measures such as massive bond purchases and ultra-low interest rates.
"It's a bit of a relief from last week. There was a bit of a scare from people who felt central banks around the world are more hawkish," said Nathan Thooft, senior managing director at Manulife Asset Management in Boston.
"People are realizing that even if they move quicker than they expected there's not going to be a dramatic shift. Today is a little more of a calmer market that's saying we can get through these hawkish dynamics."
At 10:34 a.m. ET, the Dow Jones Industrial Average was up 158.21 points, or 0.74 percent, to 21,507.84, the S&P 500 had gained 13.09 points, or 0.54 percent, to 2,436.5 and the Nasdaq Composite had added 7.49 points, or 0.12 percent, to 6,147.91.
The pan-European STOXX 600 index was up 1 percent and on track for its biggest one-day percentage rise since April 24 after posting its biggest weekly loss since early November. For June it had its steepest monthly loss in a year.
The dollar index, which measures the greenback against a basket of currencies, gained 0.5 percent.
The dollar hit session highs after a private index on June domestic manufacturing activity rose more than expected and government data showed U.S. construction spending remained flat in May but government outlays on construction projects were the highest in more than four years.
"There's nothing in the economic data that suggests things are too hot. At the same time it's not too cold either," said Thooft.
U.S. 2-year Treasury yields touched a more than 8-year high of 1.41 percent, and yields on Treasuries maturing between three and seven years touched their highest since early May after the data.
Benchmark 10-year Treasury yields hit a high of 2.33 percent and last stood at 2.31 percent.
U.S. crude oil futures were up 1.4 percent at $46.70 while Brent crude rose 1.2 percent to $49.36 a barrel after data showed moderating U.S. output.
MSCI'S all world index rose 0.4 percent, more than erasing the previous session's losses.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.09 percent after hitting its highest point in more than two years last week.
